By Luck and By Design

By Luck and By Design: the Canadian Banking System's Resilience to the Great Financial Crises
Speaker: Ellen Quigley # Oxford University
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Date and Time
7th Mar 2013 17:00 - 7th Mar 2013 18:30
Seminar Room 1, Chrysal Macmillan Building

As it is told in the media today, the story of Canada’s resilience in the face of the 2007-2009 financial crisis and its aftermath is one of smart regulation in the context of a liberalised financial sector. But this good news story obscures a more complicated narrative – one of geography, history, regulatory strengths and weaknesses, institutional structure, and happenstance; the country’s portrayal as a free market exemplar with smart regulation gives a false picture of successful financial sector policy for other states to emulate. Canada, whose policies have often mimicked those of the U.S. or the U.K. throughout its history, chose to reinforce its financial regulatory regime even as its largest trading partners went in the opposite direction. However, the simplest and most common explanation for Canada’s resilience obscures its devolution toward some of the same deregulatory practices that ensnared the United States, with consequences muted only by their delayed execution. Although stringent regulatory and supervisory frameworks certainly account for part of the system’s resilience, protectionism in the banking and mortgage insurance sectors and good timing may have played a commensurate role. So, too, did legislation enacted in the 1980s and 1990s meant to prevent recurrences of the bank failures, ballooning government deficits, and high unemployment and interest rates that characterised that era. Moreover, demand for commodities in Asia kept commodities prices high throughout the crisis, compensating somewhat for damage to other sectors. Canada was partly smart, partly lucky.